1. Introduction
 Foreign Corrupt Practices Act 1977 (FCPA) is US federal law, which
prohibits any payout to foreign officials of “anything of value” with an
intention to acquire or retain business.

FCPA is the result of corrupt financial practices and widespread illegal
payout.
 FCPA is administered jointly by the Department of Justice and the
Securities and Exchange Commission (U.S.).
 To avoid unnecessary stringency FCPA amended in 1998 and inserted two
affirmative defenses : the local law defense;
 the reasonable and bona fide promotional expense.
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

2. Purpose of the Act
 To combat against bribery in Business Transactions,
 To prohibit illegal payouts or corrupt payments to foreign officials .
 To win faith of share holders and borrowers
 To create honest businesses environment and to restore public confidence in
business transaction.
 To create awareness against anti-bribery and benefits correct financial reporting.
 To avoid legal action by law enforcing agencies
 To lay down effective control systems & Practices
 To ensure continuity of business smoothly
 Create credibility of the organization
 To protect brand from any disrepute
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

3. Applicability of the Act
 US persons and businesses
 Any person in the US territory or beyond, acting as agent / officer / director of
the US company or company registered in US.
 Employees of US company or companies require to comply under Security and
exchange Commission
 US and foreign public companies listed on stock exchanges in the United States
 Companies which are required to file periodic reports with the Securities and
Exchange Commission.
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

4. What does a corrupt practice mean under FCPA?
 Corrupt practices mean to offer, to promise, to authorise payment to
government official with an intention to wrongfully influence to acquire
and retain business.
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 Its not only actual payment, but promise to pay bribe is equally prohibited
and violation of FCPA,
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If its in due knowledge of the organization that improper payments are
being made through or by third party.

If organization consciously and deliberately ignore the acts of illegal
payment by third party.
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

5. Prohibition under FCPA
 offering to pay
 promise to pay,
 Authorizing the payment of illegal money or anything of value to a foreign
official in order to influence any act or decision of the foreign official in his or
her official capacity or to secure any other improper advantage in order to obtain
or retain business.
 What does mean to “Anything of value”
 Any unfare benefits, either directly or indirectly through cash, gift, travel ticket,
IPL ticket, extra ordinary concession, means of entertain etc offered or paid to
any official with a view to influence his discretion and decision.
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

6. Defense / allowable transaction under FCPA
 Local Law.
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Lawful expenses expressly permitted under any law
Expenses on gifts, if law /Custom /Usage expressly permits.
 Reasonable and bona fide business expenditure.
 Expenses directly incurred on :

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Promotion/demonstration/development of products.
Reasonable business travel expenses
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

7. Who are governed under the Anti-Bribery Provisions?

The FCPA’s anti-bribery provisions apply broadly to three categories of persons
and entities:-

“issuers” and their officers, directors, employees, agents, and shareholders;

“domestic concerns” and their officers, directors, employees, agents, and
shareholders;

Certain persons and entities like agent, consultant etc either in US or beyond
US territory.
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

8. Consequences of violation of FCPA & Anti bribery violation

Violation of anti- bribery provision against organization :
 Can be fined up to $ 2 million for each violation of anti bribery provision.

Violation of accounting provision against organization :
 Can be fined up to $ 25 Million for each violation of accounting provision.
ALTERNATIVELY, ANY FINE MAY BE INCREASED TO DOUBLE THE BENEFIT THE
DEFENDANT SOUGHT TO GAIN THROUGH THE ILLEGAL CONDUCT.

Violation of anti- bribery provision against individual i.e. Officer, director, agent :
 Can be fined up to $ $250,000 and imprisonment up to five years, or both.

Violation of accounting provision against individual i.e. Officer, director, agent :
 Can be fined up to $5,000,000 and imprisonment up to twenty five years
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

9. Employees / Manager / director / CFO should know
 It is illegal to give or authorize to give bribes.
 It is illegal to offer; promise to pay or to get into arrangement to compensate with
“anything of value” to government officers, with an intention to influence his
discretion.
 It is illegal to acquiesce demand of government officials or politician to donate in
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charity or political party fund, which are not constituted under law of the land.
It is illegal to hide / manipulate any payments made to third party that have or may
have or likely to be used for bribe to government officer.
It is illegal to ignore, if quantum of work and remuneration thereof do not
commensurate.
Accounting records are accurate and reflect true reasons for payments
Internal accounting and compliance controls mechanism
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

10. Cost of Non- Compliance
The cost of non-compliance with the FCPA can be significantly higher than the cost of
implementing FCPA compliance program
 Legal action (civil / criminal or both) may be initiated against the company and
official .
 Heavy penalty and imprisonment to official
 Disruption of business
 Disrepute to brand
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

11. Action by employer to shield the organization from corrupt practices
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Check antecedent and perform due diligence of third parties.
Check if internal stake holders have any interest in grant of contract to
third parties.
Set the organization expectation with third parties in advance and share
that organization is FCPA compliant.
Enter into FCPA compliance covenant.
Verify that quantum of work and consultancy fees commensuration.
Regular training to employees and third parties on anti bribery concept.
No ambiguous expenses in the form of mislaneous expense.
Book every specific expense in the books of accounts.
Get advance approval for any travel/entertainment/customary gift
expenses.
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)

12. Support in creating a culture of
ethics and morale
Thank You
Welcome the world of ethics
Ethics is great tool for growth, make it a part of core business strategy
2/5/2014
Jai Karan Nagwan (BA, LLM, MBA)